Councils in London are spending an extraordinary £5.5m a day to tackle homelessness – primarily on temporary accommodation for families.
The new figures, up from £4.2 million a day in 2023/24, are the latest illustration of the dire state of the capital’s housing market, with housebuilding having stagnated and hundreds of thousands of Londoners on council waiting lists.
They come amid speculation that London mayor Sir Sadiq Khan is preparing to lower the requirement that 35 per cent of new developments are allocated as social or affordable housing.
City Hall says “London has a mountain to climb” to provide the number of homes needed - 87,992 new homes a year from 2026, according to the Government.
Only 3,991 affordable homes were started in the capital in 2024/25. Between April and June this year, only an additional 312 were added – while a woeful 38 affordable homes that had already been in construction were completed.
London Councils, the cross-party organisation that represents the 33 boroughs, says about £5 million of the £5.5 million daily bill is being used to pay for temporary accommodation for people entitled to be housed by councils.
The total bill is up 42 per cent year on year – almost three times the rate in the rest of the country.
Most councils were forced to increase their council tax demands by the maximum allowed by the Government in April.
One borough, Lambeth, says it is facing “the most significant financial challenge in its history”, driven by over a decade of central government underfunding, rising costs and unprecedented demand for vital services such as temporary accommodation, adult social care and children’s services.
It is trying to find £84 million in savings over the six months - on top of £99 million of savings already agreed.
Cllr Claire Holland, chair of London Councils and the Labour leader of Lambeth council, said: “London boroughs are now spending a staggering £5 million a day on temporary accommodation – a stark reflection of the scale of the capital's housing crisis, which continues to worsen.
“This underlines the importance of using the most up-to-date data in the forthcoming reforms to local government finances and ensuring measures of deprivation properly reflect housing costs and the impact of homelessness.
“After more than a decade of structural underfunding, rising costs and growing demand, it is vital that boroughs receive funding which genuinely reflects the level of need in the capital.
“We want to work with the government to address our concerns with the Fair Funding Review so that we can help restore stability to council finances and prevent more boroughs being plunged into crisis.”
Local authorities in London had 336,357 households on their waiting lists in March 2024 – a quarter of the waiting list for England.
Newham, Lambeth and Brent each had more than 30,000 households on their waiting lists.
The Government is proposing to change the way it calculates how much to give councils to cover their expenditure on temporary accommodation.
London Councils fears that out-of-date data will “significantly undercount” the scale of the pressures facing boroughs and other parts of the country, and could leave boroughs £700 million worse off over the next three years.
London boroughs want the government to update the Index of Multiple Deprivation to reflect the cost of housing and increase the weighting given to factors such as homelessness and housing affordability, in light of the escalating crisis.
According to City Hall, that planning consents have been granted for more than 300,000 new homes that are waiting to be built across Greater London – suggesting that it is not the planning system that is primarily to blame for failing to increase the capital’s housing stock.
In January, Sir Sadiq used a set-piece speech at the Mansion House to ask the boroughs to “take on the Nimbys” and get housebuilding back on track.
